On 8 January 2019, HM Treasury published The Benchmarks (Amendment) (EU Exit) Regulations 2019. The publication of the draft statutory instrument follows the publication of the explanatory memorandum on 23 November 2018 (our blog is here).
The draft statutory instrument is made under the European Union (Withdrawal) Act 2018 and is intended to make amendments to the Benchmarks Regulation (BR) to ensure that it continues to operate effectively in the UK once the UK has left the EU.
UK located benchmark administrators seeking authorisation or registration will continue to apply to the FCA. However, the draft statutory instrument:
- clarifies that the scope of the onshored BR is the UK, and not the whole of the EU; and
- ensures that EU located administrators are subject to the onshored third country regime, which recognises third country administrators or benchmarks to become approved via recognition or endorsement applications to the FCA to allow use of their benchmarks in the UK by supervised entities (unless and until an equivalence determination is made).
Changes introduced by the draft statutory instrument include:
- reflecting the general onshoring approach to transfer functions under the BR from the European Securities and Markets Authority (ESMA) to the FCA, reference is made to a UK register of benchmarks which the FCA will have the responsibility for maintaining once the UK has left the EU;
- on exit day administrators that have already been authorised or registered in the UK by the FCA will be automatically migrated to the UK register without the need to submit a new application to the FCA under the onshored BR. The draft statutory instrument makes that same provision for third country benchmarks and/or administrators that have been recognised by the FCA, or endorsed by UK administrators or supervised entities (with such endorsement authorised by the FCA) prior to exit day;
- a transitional provision which temporarily migrates over to the UK register for a 24 month period any benchmarks or administrators which appear on the ESMA register at exit day as a result of a successful application outside of the UK. This will automatically enable continued use of these benchmarks, or benchmarks provided by these administrators, by UK supervised entities for 24 months after exit day, unless and until an application for approval in the UK is refused. These third country administrators or benchmarks must become approved by the FCA through equivalence, recognition or endorsement to enable their continued use within the UK beyond the 24 month period; and
- where a benchmark or benchmark administrator subject to this transitional provision is removed from the ESMA register after exit day, it will also be removed from the UK register, unless the FCA considers that doing so would not be compatible with the FCA’s strategic objective or would have a material adverse effect on the advancement of the FCA’s operational objectives.
You can track the financial services Brexit EU Exit statutory instruments (as well as gain access to our Brexit resources) on our Brexit Pathfinder hub. Registration is free via the NRF Institute portal. Conformed copies of the EU Exit statutory instruments are available exclusively through our PathfinderPLUS service. To gain access to PathfinderPLUS, please contact Jochen Vester or Simon Lovegrove .